By Paul Norbury
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Additional resources for Business in Japan: A guide to Japanese business practice and procedure
A sweeping success, such as that of MacDonald's which opened the first hamburger shop in Tokyo's Ginza district in 1971 and seven years later had increased the number ofits chain shops to over 150, could not have been obtained without intensive and efficient use ofTV advertisements. eJapanese consumers have grown to be highly sophisticated in discretionary items and highly selective in essential items. This phenomenon of dual polarisation can be particularly observed amongst the 'Bachelor Peerage', 'Bachelor Peeress' and 'New Family' groups (discussed in detail later) , who are relatively high spenders.
As a result,' states Cornelis Bossers, president of Philips Industrial Development and Consultant Co. , 'the intense competition among manufacturers in Japan is such that only the best products will be able to maintain any kind of market share. Japanese consumers demand that products be flawless from the beginning. In Europe, for example, customers take for granted that about 3 per cent of all products will be slightly defective, and these will simply be serviced. ' After-sales service is broader and more personal in Japan than in most countries: since such service tends to be costly, Japanese manufacturers find it cheaper to assure high quality standards to avoid after-sales service as much as possible.
Either the low investment and high prices restrict the market for the product; or if the product has some advantage and can command a high price and high margins for both the exporter and the Japanese distributor, as the market widens it is certain to attract the interest of local competitors. At this point, some critical decisions must be made. Either prices must be lowered sufficiently to discourage competitive entry, or the foreign firm must make a defensive investment in Japanese production to save and expand market share.